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Pimco High Income Fund Pimco Hi Message Board

  • wheelbarrowme wheelbarrowme Aug 2, 2011 11:35 PM Flag

    Maintain Divy By Returning Yr Capital?

    If this happens, this fund and investment will be weakened and not so attractive? Thoughts?

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    • jdfunnell Aug 3, 2011 8:32 PM Flag

      They are well detailed in the Annual Report available online.........Dave

    • did you know the specifics of future contracts they use or any other posters know what they are doing(phk) regarding futures?

    • rsp55 Aug 3, 2011 10:56 AM Flag

      I think you are right to be worried about this and there is a lot of complacency on this board, particularly from this vitrioloc ukcuh character who becomes offensive whenever anybody has an opposing opinion.

      A while ago I posted some commentary on my opinion regarding this fund. I don't feel it has been well managed even though it has maintained a stable dividend. I think PHT is a much better choice in this space. Eventually the physics of the market will catch up with this one...


      All of those steady dividends that many of you are so proud of is masking a very serious underlying issue of this fund. The simple fact is that the fund is NOT EVEN CLOSE TO EARNING ITS DIVIDEND and it hasn't been FOR SEVERAL YEARS and its getting worse:

      Witness from PHK's latest annual report, the distributions vs net investment income available after payment to preferred shareholders:

      2007: 1.46 vs 1.32, (over distributing by 11%)
      2008: 1.46 vs 1.35, (over distributing by 8%)
      2009: 1.46 vs 1.22, (over distributing by 20%!)
      2010: 1.46 vs 1.12, (over distributing by 30%!)
      2011: 1.46 vs 1.12, (over distributing by 30%!)

      I mean come on. This fund is effectively handing you back part of your investment and what is worse is that they are not even characterizing it as a return of capital so you are getting taxed on it. I could also create the illusion of a high yield by handing you back part of your investment veiled though the use derivative instruments, as many of these CEFs do, but the siren song of this one in particular is one of the biggest offenders and she is not doing you any favors. Plus this beast has no cushion whatsoever in undistributed net investment income as it now sports a negative UNII of 24 cents/share (wow).

      From CEFConnect, the 10 highest yielders in the high income space show that PHT and HIX are safer choices because they are not over distributing and have plenty of UNII. However, in this low interest rate environment I feel that junk assets are quite overvalued so they are not likely the best investments currently. In the recent sell off of risky assets, the market depreciated PHK disproportionately because of these factors. The perceived virtues of this fund (i.e. steady dividends and a rising market value) is an illusion that can quickly fade in a turbulent market, as we have just witnessed. Now I know some will likely go all hostle on me for daring to question such a stable ride. After all PIMCO is a genius of the bond market and they will protect me. Besides all of those geniuses who happened to buy at $4/share will probably be able to get out at any sign of trouble. Well, you just keep telling yourself that. At the same time you might what to ask yourself, what other asset did many say would never depreciate?

    • LOL. That canard again? Wrong. Take a peek at what the earnings were in the past year..

9.66-0.01(-0.10%)Oct 26 4:02 PMEDT